Baucus's comments follow the recent release of the Internal Revenue Service’s (IRS) Tax Gap Report, which found the 'tax gap', the difference between legally-owed taxes and those actually paid to the IRS, increased between 2001 and 2006.

“This report shows that closing the tax gap needs to be a major focus of tax reform," said Baucus. "An improved tax code that’s simple and fair to all Americans will help close the tax gap, boost our economy and create jobs,”

“In an era when we’re squeezing the federal budget for every dollar of savings, we have to make every effort to recover these lost funds," he added. "We simply can’t afford to lose USD450bn while we’re asking each American to pitch in to reduce the deficit.”

In fact, the new IRS figures show that the US compliance rate is essentially unchanged from the last review covering the 2001 tax year. With estimated total tax liabilities rising from USD2.11 trillion in 2001 to USD2.66 trillion in 2006, the tax gap also increased from USD290bn to USD385bn over the same period. Therefore, the estimated tax compliance reached a level of 85.5% in 2006, compared with 86.3% five years earlier.

As part of his work on tax reform, Baucus convened a hearing last June addressing the relationship between the complexity of the tax code and the tax gap. At the hearing, he said Congress should pursue an effort to simplify the code and reduce its complexity as a means of narrowing the gap. He noted that taxpayers and businesses spend more than six billion hours each year complying with their tax responsibilities, and the Taxpayer Advocate added that if those resources were dedicated to one single industry, it would be one of the largest in the US and employ more than three million full-time employees.